By Carolyn Bigda Chicago Tribune.
Six years ago, Cherie and Brian Lowe decided they'd had enough with being in debt.
The couple, who live in Greenwood, Ind., owed more than $127,000 in student loans, credit card bills, auto loans and more.
With a second child on the way, they worried about how they would make ends meet.
"I knew what we were doing wasn't going to work with another child," Cherie Lowe said.
So in April 2008, the Lowes added up everything they owed and devised a plan for how to chip away at the debt.
The couple is not unlike many young people who find themselves deep in debt early in adult life, even when you have a college degree and a good-paying job.
According to a recent study that looked at the personal finances of college-educated millennials, 81 percent of these young adults have some form of long-term debt, such as student loans, a mortgage or car loan.
Managing that debt is a big concern.
In the study, 47 percent of those with student loans are worried about their ability to pay off the balance, according to TIAA-CREF Institute and the Global Financial Literacy Excellence Center, which published the findings in February. (Millennials are defined as those ages 23 to 35.)
It took nearly four years, but Cherie and Brian Lowe, now 37, are debt-free.
Cherie Lowe, who has given herself the nickname "the Queen of Free," documented the couple's quest on her website, QueenOfFree.net, and is writing a book, "Slaying the Debt Dragon," to be published this fall.
For millennials struggling to get out of the red, Lowe talked about some of the strategies that worked for her family.
START SMALL: To get started, the first thing the Lowes did was adjust the tax withholding from Brian Lowe's paycheck. In doing so, the couple gave up the possibility of collecting a refund when they filed a tax return in April, but it gave the couple an extra $100 per month to apply toward debt.
The Lowes started small, using the newly found cash to pay off a store credit card.
Financial advisers often recommend putting extra money toward the highest interest-rate debt first, but Cherie Lowe said eliminating one balance right away helped the couple to build momentum.
"It gave us the first little boost of confidence," she said.
Once the store card was gone, the couple turned to the next-largest balance and added $100 to the monthly bill.
They repeated the process again and again, rolling over the sum of their monthly payments plus the extra cash as each balance was eliminated.
"Eventually the amount snowballs and you start to take big chunks out of the more sizable debt," Lowe said.
Their progress became infectious. "The more success we had, the more excited we were and the more sacrifices we were willing to make," she said.
BUILD A SAFETY NET: At the same time, the Lowes were determined to scrape together $1,000 for an emergency savings fund.
"It's never a question of 'if' your water heater blows up or if the brakes on your car go, but 'when,' " Cherie Lowe said.
To pay for those costs without having to use credit cards, the Lowes decided they needed to build some savings, which they accumulated by selling jewelry, books and other items, as well as banking small windfalls, such as birthday money.
It was a smart move.
Young adults with big liabilities may be more likely to rely on credit cards to cover day-to-day bills.
According to the TIAA-CREF and GFLEC study, 53 percent of millennials who have both a credit card and long-term debt carry a balance on their credit card.
Adding debt on top of debt will not help you get out of the red. "Saving that $1,000 was one of the first things we did," Lowe said. "It was key."